Strip center environmental due diligence: tenants past and present
A strip center is only as clean as its worst past tenant.
Why strip centers and neighborhood retail carry this risk
Neighborhood retail has hosted dry cleaners, photo processors, nail salons, auto service bays and print shops. Any of them can leave solvents behind long after the sign comes down.
Pad sites on the road frontage are often gas stations or quick lubes, with tanks that sit under your parking lot or next to it.
What usually turns up
A dry cleaner in the tenant history
Often seriousThe most common and most costly finding in small retail. Check every unit's past tenants, not just today's.
Gas station or lube pad site
Worth checkingTank leaks on a pad site can reach the main parcel. Check whether the pad is part of your purchase.
Vapor between units
Worth checkingShared slabs let solvent vapor move from one unit to the next.
Flood exposure for the whole row
Usually minorOne building on a low part of the lot can push the flood insurance question for the loan.
What the pre-screen checks for a strip center
- Old city directories and historical aerials for every tenant type, back several decades.
- Dry cleaner, hazardous waste and tank records for each address in the center.
- Cleanup sites nearby that could send vapor or groundwater under the center.
- Flood zone for each building on the parcel.
Pre-screen a property before you spend on a Phase I
A desk review of one address: past uses from historical photos and maps, federal and state environmental records, and flood risk, ready usually within the hour. $100 for one report, or $100/month for 3.
Questions to ask the seller
- Can you share a tenant history for every unit, as far back as you have it?
- Has a dry cleaner ever operated on site, or only drop-off?
- Is the pad site included, and what has it been?
- Any prior Phase I, vapor test or state letters?
When to order a full Phase I
Order a full Phase I for any center with a past cleaner, auto use or fuel pad. Most lenders will require one regardless.